Robert Goodman Accountants Blog

Do you provide car parking to your employees on your business premises? If the parking meets certain conditions you may have to pay fringe benefits tax (FBT) on those and other benefits you provide to your employees. The ATO has commenced a compliance program that looks at employers that use the market value method to calculate the taxable value of car fringe benefits. Specifically, it is looking at employers that have engaged an arm's length valuer that has produced reports that may not reflect the market value.

The ATO has started contacting certain employers that provide car parking fringe benefits to their employees to ensure that all FBT obligations are being met. Generally, car parking fringe benefits arise where the car is: parked on the business premises of the entity providing the benefit; used by the employee to travel between home and their primary place of employment and is parked in the vicinity of that employment; parked for periods totalling more than 4 hours between 7am and 7pm; and a commercial parking station located within 1 km of the premises charges more than the car parking threshold amount.

Employers that meet the above conditions are providing parking benefits and have a choice of 3 methods to calculate the taxable value of the benefits, the commercial parking station method, the average cost method, and the market value method.

The method currently under ATO scrutiny is the market value method, which states that the taxable value of a car parking benefit is the amount that the recipient could reasonably be expected to have been required to pay if the provider and the recipient were dealing with each other under arm's length.

Under this method, the employer must obtain a valuation report from an independent valuer who has expertise in the valuation of car parking facilities and is at arm's length.

Specifically, the ATO is looking at employers that have engaged an arm's length valuer as required under the market value method. According to the ATO, it has information that valuers in some instances have prepared reports using a daily rate that doesn't reflect the market value and as such, the taxable value of the benefits is significantly discounted or even reduced to nil.

The ATO notes that just engaging an arm's length valuer does not mean you've met all the requirements for working out the taxable value of the car parking fringe benefits. It states that it is the employer's responsibility to confirm the basis on which the valuation is prepared and examine any valuation that is suspected to be incorrect or considerably reduces FBT liability.

At a minimum, the ATO requires that a valuation report must be in English and detail the following:

  • date of valuation;
  • precise description of the location of the car parking facilities valued;
  • the number of car parking spaces valued;
  • the value of the car parking spaces based on a daily rate;
  • the full name of the valuer and their qualifications;
  • the valuer's signature; and
  • a declaration stating the valuer is at arm's length from the valuation.

According to the ATO, in addition to the valuation report, you as an employer will also need a declaration relating to each FBT year that includes the number of car parking spaces available to be used by employees, the number of business days, and the daily value of the car parking spaces.

Not sure?

If you're unsure whether the benefits you provide to your employees are subject to FBT, talk to us. We can also help you determine whether your business qualifies for exemptions under various categories of FBT. If you would like to know more about whether the valuation that you have obtained meets the ATO requirements, contact us today to find out.

Email us at Robert Goodman Accountants at reception@rgoodman.com.au © Copyright 2020 Thomson Reuters. All rights reserved. Brought to you by Robert Goodman Accountants.

Laws limiting foreign residents' ability to claim the CGT main residence exemption are now in place. This means that if you're a foreign resident at the time of disposal of the property that was your main residence, you may not be entitled to an exemption and may be liable for tens of thousands in capital gains tax. Some limited exemptions apply for "life events" as well as property purchased before 7:30pm (AEST) 9 May 2017 and disposed of before 30 June 2020.

Foreign residents beware, laws have been passed to restrict your access to claim the CGT main residence exemption on the sale of your home, except in some limited circumstances. This applies to any person that is not an Australian resident for tax purposes at the time of disposal (ie when the contract is signed to sell the property).

According to the Tax Office, a person's residency status in earlier income years will not be relevant and there will be no partial CGT main residence exemption available in those circumstances. Therefore, not only are current foreign residents affected, current Australian residents that are thinking of spending time overseas either for work or other purposes may also need to factor in this change to any plans they have on selling a main residence while overseas.

For current foreign residents, fret not, as there may still be time to act. You can still claim the CGT main residence exemption if, when the CGT event happens to your property, you were a foreign resident for tax purposes for a continuous period of 6 years or less and during that time one of the following "life events" happened:

  • you, your spouse, or your child under 18, had a terminal medical condition;
  • your spouse, or your child under 18, died;
  • the CGT event involved the distribution of assets between you and your spouse as a result of your divorce, separation or similar maintenance agreement.

Further, if you purchased your main residence before 7:30pm (AEST) on 9 May 2017, you may still be entitled to the exemption provided you sell your home on or before 30 June 2020, subject to satisfying other existing requirements for the exemption. If you miss the 30 June window for disposal of the property in 2020 (ie disposals from 1 July 2020), you will not be entitled to the main residence exemption unless one of the above "life events" occur within a continuous period of 6 years of becoming a foreign resident.

Similarly, for properties acquired on or after 7:30pm (AEST) on 9 May 2017, the CGT main residence exemption will not apply to disposals from that date unless certain "life events" occur within a continuous period of 6 years of the individual becoming a foreign resident.

Even death doesn't get you out of this tax, if you're a foreign resident for tax purposes when you die, the changes will apply to legal personal representatives, trustees and beneficiaries of deceased estates, surviving joint tenants, and special disability trusts.

Since this law change is retrospective, the Tax Office requires foreign residents who acquired property on or after 7:30pm (AEST) on 9 May 2017 to review their positions back to the 2016-17 income year and seek amendments where necessary. Foreign residents who purchased their property before 7:30pm (AEST) on 9 May 2017 and disposed of their property after 30 June 2020 will only need to review their positions to the 2020-21 income year.

According to the Tax Office, it will not apply shortfall penalties and any interest accrued will be remitted to the base interest rate up to the date of enactment of the law change. Additionally, any interest in excess of the base rate accruing after the date of enactment will be remitted where taxpayers actively seek to amend assessments within a reasonable timeframe after enactment.

What to do now?

Realistically, current foreign residents have a period of less than 6 months to take advantage of the main residence exemption. So, if you're a foreign resident with plans to sell your main residence, now would be the time to start preparations to ensure that you save hundreds of thousands. Alternatively, if you're a foreign resident that previously sold property purchased after 9 May 2017, we can help you review your position. Contact us today.

Contact our office to discuss how the deferred GST scheme could benefit your business or to explore other strategies for improving your cashflow position.

Email us at Robert Goodman Accountants at reception@rgoodman.com.au © Copyright 2020 Thomson Reuters. All rights reserved. Brought to you by Robert Goodman Accountants.

More help for first home buyers

The new year means more help for first home buyers to get on the property ladder. The new First Home Loan Deposit Scheme came into effect on 1 January 2020 and seeks to provide eligible first home buyers on low and middle incomes with a guarantee so they can purchase a residential property with a deposit of as little as 5%. Currently, only 7,000 places are available with 3,000 having already been taken up, but 10,000 more places will be released in July. Eligibility depends on the financial circumstances of the applicants as well as the property value.

With the advent of the new year as well as a new decade, a new measure is now in effect to give first home buyers a leg up on the property market. Starting 1 January 2020, couples that earn less than $200,000 combined, and singles that earn less than $125,000, who have never owned a property and are Australian citizens may apply for the First Home Loan Deposit Scheme (FHLDS). Australian permanent residents will not be eligible, and if you're applying as a couple, both will need to be Australian citizens.

The FHLDS provides a guarantee that will allow 7,000 lucky eligible first home buyers on low and middle incomes to purchase a residential property with a deposit of as little as 5%.

To be eligible, you must meet the income criteria above, be over 18, and move into the property within 6 months from the date of settlement, or if later, the date an occupancy certificate is issued and continue to live in that property for so long as your home loan has a guarantee under the scheme. In other words, investment properties are not supported under the scheme and if you don't live in the purchased property, or if you move out of the property at a later time, your home loan will cease to be guaranteed by the scheme. At which time, you may be required to pay bank fees/charges/insurance that would've otherwise applied had you not been a part of the FHLDS.

The scheme also caps the maximum property purchase price to ensure that only modest homes are covered. For example, in an NSW capital city or a regional centre, the maximum value of property that is covered under the FHLDS is $700,000. For a Victorian capital city or regional centre the maximum is $600,000. That figure falls to $400,000 for WA, SA and Tasmanian capital cities. Queensland capital city and regional centre has a cap of $475,000.

Under the FHLDS, eligible singles or couples are able to purchase existing dwellings, house and land packages, land and separate contract to build a home, "off-the-plan" purchases, and eligible building contracts. However, each category has its own criteria which must be satisfied, for example, for "off-the-plan" purchases, the settlement date of your home loan must occur within 90 days of your home loan becoming guaranteed under the scheme.

Initially 10,000 places were released on 1 January, but 3,000 potential first home buyers have already been registered under the FHLDS by participating banks. If you miss out on the 7,000 that is currently available due to the need to gather the necessary financial information to support your application, don't fret, another 10,000 will be released from July 2020.

Currently, the scheme is only being offered by 2 participating major bank lenders, however, from 1 February 2020, 25 smaller lenders will join the scheme's lending panel to offer more choice to eligible applicants. If you don't want to go direct to the banks, you can also apply for the scheme via registered mortgage brokers provided the broker has a relationship with a participating lender.

Interested in applying?

If you have an eligible property in mind and want to apply for the FHLDS, the first thing to do is gather all the information required for a loan application including personal identification and income details. We can help you gather the appropriate tax return and ATO assessments should the bank require it and compile documents of other regular income including dividends. Contact us today.

Email us at Robert Goodman Accountants at reception@rgoodman.com.au.  © Copyright 2020 Thomson Reuters. All rights reserved. Brought to you by Robert Goodman Accountants.

Running a business and ensuring your employees are paid the correct super can be difficult and inadvertent mistakes can be made from time to time. Previously, a mistake may not be picked up for years after it occurs, but with the advent of single touch payroll, the ATO now has more data than ever to ensure that the correct super guarantee payments are made and impose penalties where the payments are not correct. So, if you make a mistake, what are the conditions that you have to satisfy to obtain a remission of the additional super guarantee charge penalty?

With the transition to Single Touch Payroll almost complete for all employers within Australia, the ATO now has considerably more information to identify superannuation guarantee non-compliance in real time. Employers that do not make sufficient quarterly superannuation contributions for each employee by the due date will be liable to the superannuation guarantee charge (SGC), a penalty which is not deductible to the employer.

Generally, SGC equals the superannuation guarantee shortfall, which is made up of the total of the individual super guarantee shortfalls for all employees for the quarter, an interest component of 10% per annum and an administration component of $20 per employee per quarter. If an employer has a shortfall, they are required to lodge a superannuation guarantee (SG) statement by the 28th day of the second month following the end of the quarter.

Where the employer lodges their SG statement late or fails to provide information relevant to assessing liability to SGC for the quarter, they may be subject to an additional penalty of 200% of the amount of SGC. This additional penalty is automatically imposed on the employer by superannuation law.

While the ATO does not have discretion to remit or waive the interest and administration components of the SGC, it does have discretion to remit some of the additional 200% penalty provided the employer satisfy certain conditions. According to information released by the ATO, penalty relief will only be applied on limited circumstances where it is considered that education is a more effective option to positively influence behaviour (ie an employer with SG knowledge gaps that has led to non-compliance).

In addition to the above, an employer is only eligible for penalty relief where they have a turnover of less than $10m and they:

  • do not have a history of lodging SG statements late;
  • have lodged no more than 4 SG statements after the lodgement due date in the present case;
  • have no previous SG audits where they were found to have not met their SG obligations; and
  • have not previously been provided with penalty relief.

An employer cannot receive penalty relief where they have:

  • been issued with an SG default assessment;
  • lodged more than 4 SG statements after the lodgement due date in the present case; or
  • previously been issued with an SG education direction.

The percentage of penalty remission depends entirely on an employer's degree of compliance.

For example, where there is severe/repeated disengagement or where the ATO is of an opinion that the employer has engaged in a phoenix arrangement, there will be no remission of additional penalty, hence the penalty will remain 200% of the SGC. On the other side of the spectrum, where an employer lodges an SG statement after the due date but before any ATO contact (including instances where an employer makes initial contact with the ATO to disclose a shortfall, followed by the lodging of SG statement after discussions), the additional penalty may be reduced to 20% of SGC.

The ATO may also consider other relevant facts of circumstances to further increase penalty remission, including:

  • natural disasters;
  • contractor vs employee – employer has reasonable argument;
  • incorrect advice or guidance by the ATO;
  • malfunction or outage of key ATO system causing employer to miss lodgement due date;
  • ill health of employer or key employee of employer; or
  • non-compliance occurred in the first year of operation, and principals had no previous business experience.

Confused?

If you're running a business, paying the right amount of super at the right time to your employees can be the most challenging part of the business. If you're unsure of whether your business has made the correct super guarantee payments, we can help you work that out. We can also help you liaise with the ATO to obtain the best possible outcome in the event that your business has a shortfall. Contact us today.

Email us at Robert Goodman Accountants at reception@rgoodman.com.au.  © Copyright 2020 Thomson Reuters. All rights reserved. Brought to you by Robert Goodman Accountants.

 

We are pleased to introduce you to our newest team member Lion Leo, who has been cared for by the amazing team at the Koala Hospital Port Macquarie

Our adoption helps the Hospital continue to help those Koalas impacted by the recent devasting bushfires recover to full health and lead a happy life!

Support for bushfire victims

As bushfires continue to rage across the country, support for devastated communities are coming from all sides and the ATO is no exception. It has announced automatic deferrals for lodgement and payments for taxpayers in impacted postcodes in the states of NSW, Victoria, Queensland and South Australia. BAS deferrals up to 21 March 2020 may be available depending on the area and additional postcodes may be added to the list once damage assessments have been finalised.

As the bushfires that devastated large swathes of the country continue on their destructive path leaving shatter communities in their wake, there are glimmers of hope with efforts to support and rebuild these communities starting to gather pace. In conjunction with these efforts, the ATO has announced automatic deferrals for lodgements and payments for taxpayers in impacted postcodes in the states of NSW, Victoria, Queensland and South Australia.

Taxpayers in areas impacted by bushfires in November 2019 will have until 28 January 2020 to lodge their November quarterly BAS. Monthly BASs for November and December have been automatically deferred to 21 January 2020. In addition, 2018-19 income tax bills that were due on 21 November 2019 has been deferred to 21 January 2020.

Those in bushfire impacted zones in December/January 2020 will have until 21 March 2020 to lodge their December, January and February monthly BASs.

In NSW, December/January impacted postcodes include areas in Bega Valley, Blue Mountains, Central Coast, Eurobodalla, Hawkesbury, Kyogle, Lithgow, Mid-Western, Queanbeyan-Palerang, Shoalhaven, Singleton, Snowy Valleys, Wingecarribee, and Wollondilly. November impacted postcodes include areas in Armidale, Bellingen, Cessnock, Clarence Valley, Coffs Harbour, Glen Innes Severn, Inverell, Kempsey, Lismore, Mid-coast, Nambucca, Port-Macquarie, Richmond Valley, Tenterfield, Uralla, and Walcha.

South Australian impacted postcodes include areas of Adelaide Hills, City of Playford, Kangaroo Island, Lower Eyre Peninsula, Mount Barker, and Yorke Peninsula. Victorian impacted postcodes include areas in East Gippsland and Towong. Queensland impacted postcodes include areas of Noosa, Livingstone, Somerset, and Toowoomba. According to the ATO, additional postcodes may be added to the list once damage assessments have been finalised.

The ATO has set up an emergency support information line for people that have been affected by the bushfires but their postcode is not currently in the identified impacted postcodes list. Those individuals with homes or businesses in the impacted postcodes can also use the emergency support line if they require more assistance. The ATO notes that it can:

  • fast track any refunds owed;
  • help find lost TFNs by using methods to verify your identify such as date of birth, address, and bank details;
  • re-issue income tax returns, activity statements and notices of assessment;
  • help reconstruct tax records that are lost or damaged;
  • remit penalties or interest charged during the time you have been affected;
  • give extra time to pay debts or lodge tax forms; and
  • set up a payment plan tailored to individual circumstances, including an interest-free period.

The government is also working to ensure that disaster recovery allowance payments made to individuals, and grants made to small businesses and primary producers under disaster recovery funding arrangements will be tax exempt. An extra $400 will be allocated to families for each child that has qualified for these payments and additional financial counselling services will also be available.

Financial support for RFS volunteers is expected to be available in late January for those individuals that have been called out for more than 10 days this fire season and who are self-employed or work for small and medium businesses. Payments provide for lost income of up to $300 per day up to a total of $6,000 per person. It will not be means tested and the amount received will be tax-free.

Want to find out more?

If you or your family has been affected by the bushfires, the last thing you want to be thinking about is tax. We can help you figure out whether you get an automatic deferral and contact the ATO to make further arrangements while you concentrate on the task of rebuilding.

Email us at Robert Goodman Accountants at reception@rgoodman.com.au.  © Copyright 2020 Thomson Reuters. All rights reserved. Brought to you by Robert Goodman Accountants.

In 2018, the ATO issued a controversial draft ruling which took a very strict stance on the four-year time limit for claiming input tax credits and fuel tax credits. The ruling had been used by the ATO to deny input tax credits and fuel tax credits where the Commissioner makes a decision on an objection or amendment request outside the 4-year period. However, a recent observation by a judge ruling on a related matter has put the ATO's strict stance in doubt and as a result, the ruling has been withdrawn.

The ATO has recently withdrawn Draft Miscellaneous Taxation Ruling MT 2018/D1 on the time limit for claiming input tax credits and fuel tax credits. Generally, under s 93-5 of the GST Act, the right to claim an input tax credit expires after 4 years and commences on the day on which the entity was required to lodge a return for the tax period to which the input tax credit would be attributable. Section 47-5 of the Fuel Tax Act has a similar provision which limits claims to 4 years after the date which taxpayers were required to give the Commissioner a return.

The withdrawn draft ruling created much controversy for its strict stance on the four-year time limit rules for claiming the credits. It stated that a tax credit would not be taken into account in an assessment when the taxpayer lodges an objection or requests an amendment, even if the objection or amendment request is made within the 4-year entitlement period. Therefore, the effect of the draft ruling was that if the Commissioner's decision on an objection or amendment request is made outside the 4-year period (but the request by the taxpayer is lodged within the 4-year period), the taxpayer would not have been entitled to the tax credits even if the decision is favourable to the taxpayer.

After the draft was issued however, the Federal Court in Coles Supermarkets Australia Pty Ltd v FCT [2019] FCA 1582 did not quite agree with the ATO stance. It accepted Coles' submissions that s 47-5 is only intended to prevent an ongoing entitlement to claim credits in a later return where a return has not been lodged or credits not claimed.

The Court noted that once a return has been lodged and objected to, there is no scope for the operation of s 47-5 to disentitle a taxpayer to fuel tax credits as the right of the Commissioner and taxpayer are protected by various sections of the TAA

In a decision impact statement following the judgement in the Coles case, the ATO acknowledged that the Court's observations were contrary to its views. Subsequently, it withdrew the ruling conceding that the views expressed in MT 2018/D1 was no longer current. While the Coles decision only refers to fuel tax credits, given the similarity of the provisions between fuel tax credits and the GST Act, and the Court's observations regarding the right of the Commissioner and taxpayer being protected by TAA, it would stand to reason it would also apply to input tax credits. Thus, the ATO is planning to issue a new ruling that takes into account the Federal Court's observations in early 2020.

In the meantime, what it means for affected taxpayers is that, where the Commissioner makes a decision on an objection or requests for amendment in relation to input tax credits and/or fuel tax credits outside the 4-year period (with the initial objection or amendment request lodged within the time limit), taxpayers will no longer be automatically denied the credits in situations where the decision is favourable. As a result, any taxpayer that the draft ruling has affected (ie has had input tax credits or fuel tax credits denied because objections or amendment decisions by the Commissioner had been made outside the 4-year time limit) is encouraged to contact the ATO.

Have you been affected?

If your business has been affected by the denial of input tax credits or fuel tax credits due to this ruling, we can contact the ATO on your behalf to see what remedies can be offered. If you're not sure whether you have been affected, we can also help you figure that out, contact us today.

Email us at Robert Goodman Accountants at reception@rgoodman.com.au.  © Copyright 2020 Thomson Reuters. All rights reserved. Brought to you by Robert Goodman Accountants.

Looking for opportunities to improve cashflow? If you import goods as part of your business, you don't have to pay GST upfront if you're registered for the ATO's deferred GST scheme. Instead, you can defer and offset GST amounts in your next activity statement. However, there are some eligibility requirements – including a condition that your business lodge activity statements monthly (rather than quarterly). Find out how you can take advantage of the scheme.

If you import goods into Australia as part of your business, your cashflow position is probably top of mind. So, if you're not already taking advantage of the ATO's scheme to defer GST payments on imports, it's time to talk to your adviser. The scheme can benefit not only wholesalers, distributors and retailers, but also any business that imports goods for use in carrying on its business.

Usually, GST is payable on most imports into Australia and goods will not be released until the GST is paid to customs. This can have significant cashflow implications for importers. While you're generally able to claim a credit later for the GST paid, you still need to have the funds to pay the GST at the time of importation.

The ATO's deferred GST scheme allows participants to defer payment of the GST amount until their next business activity statement (BAS) is due.

This means you can start selling or using the imports in your business right away without having to come up with the GST amount when the goods arrive in the country.

Eligibility for the scheme

Businesses who wish to take advantage of this scheme must apply first and be approved by the ATO. To be eligible, you must have an ABN and be registered for GST. You must also lodge and pay your BAS online. This can be done yourself or through your registered tax or BAS agent.

Another key requirement is that you must also lodge your BAS monthly, which means that if you're currently lodging quarterly you'll need to elect to lodge monthly. (When you make this election, the change won't take effect until the start of the next quarter, so you won't be able to defer GST on imports until the start of that quarter.) If this applies to you, you'll need to weigh up whether the deferred GST scheme is worth giving up quarterly BAS lodgement.

Once you're approved for the deferred GST scheme, it's important that you lodge and pay your monthly BAS on time. The ATO may remove you from the scheme if you fall behind, and in this case you'd need to reapply for the scheme.

Timing of the deferral and credits

Once you're approved, your GST amounts on taxable imports will be deferred until the first BAS you lodge after the goods are imported (which for monthly lodgers is due 21 days after the end of the month). The deferred amount is reported electronically by customs to the ATO, who will use this data to pre-fill the "deferred GST" in your BAS.

The deferred GST liability is then effectively offset by a GST credit you can claim for the deferred amount. As with all GST amounts you pay on purchases you make for your business, you can claim a credit for the deferred GST liability on your imports to the extent that you use the goods in carrying on your business (and you can't claim a credit for private use or to make input-taxed supplies). Therefore, the overall effect of participating in the deferred GST scheme is that your GST on imports is deferred and offset, and you aren't required to have funds available to pay the GST when the goods are initially imported.

Could your cashflow be improved?

Contact our office to discuss how the deferred GST scheme could benefit your business or to explore other strategies for improving your cashflow position.

Email us at Robert Goodman Accountants at reception@rgoodman.com.au © Copyright 2020 Thomson Reuters. All rights reserved. Brought to you by Robert Goodman Accountants.

When can I access my super early?

Thinking about tapping into your super early to help with mounting expenses? Mortgage repayments, medical treatments and hard-to-meet living costs are all potentially valid reasons for early access to super – but the eligibility rules are strict. Find out what criteria apply so you can make an informed decision about your best course of action.

The ATO says it's fielding many calls from Australians who wish to access their superannuation on "compassionate" grounds but don't meet the eligibility criteria. The requirements for this type of release are possibly stricter than many people realise. So, when exactly can you access your super early?

You must meet a "condition of release" before you can access you super. The major events are attaining 65 years and "retirement", which both allow you to access your entire super balance.

If you haven't met these milestones but have reached preservation age (currently 57 years, but set to gradually increase to 60 over the next few years), you can start a "transition to retirement income stream" (TRIS), which enables you to access up to 10% of your super balance each year. Other release grounds include temporary incapacity, permanent incapacity and having a terminal medical condition.

But if none of these grounds apply to you and you're experiencing some financial difficulty, you might qualify under "severe financial hardship" or "compassionate" grounds.

Severe financial hardship

If you're currently receiving income support from the government, you may qualify for "severe financial hardship" release. You must apply to the trustee of your super fund, who will decide whether you qualify. How much you can access depends on your age.

If you're below preservation age, there are two major requirements. First, you must have been receiving Commonwealth income support payments for a continuous period of 26 weeks. Second, the trustee of your super fund must be satisfied that you're unable to meet "reasonable and immediate family living expenses". If you meet these criteria, you can access up to $10,000 of your superannuation in any 12-month period as a single lump sum.

However, if you've reached preservation age you can potentially access any amount of your super balance. To qualify, you must have been receiving income support for at least 39 weeks since you reached preservation age, and the trustee must be satisfied you're not currently gainfully employed on a full-time or part-time basis. This is a tough test to meet, so if you don't qualify you could consider accessing the $10,000 option above or commencing a TRIS instead.

Compassionate grounds

Compassionate grounds apply where you don't have the financial capacity to pay expenses for:

  • medical treatment (of certain recognised illnesses and injuries) or medical transport for you or a dependant;
  • making a payment on a loan to prevent foreclosure on your home;
  • modifying your home to accommodate your (or a dependant's) severe disability;
  • palliative care for you or a dependant; or
  • funeral expenses for a dependant.

To access your benefits you must apply to the ATO, who will determine an amount that you "reasonably require" to pay the expense (although special limits apply where you're accessing funds to prevent foreclosure on your home). The approved amount can then be released by your super fund. If your fund doesn't allow early release on compassionate grounds, you could consider moving your benefits to another fund.

Getting approval can be tough. The ATO won't approve a release if you can meet the expense with savings or by selling assets. There are also particular rules (and evidence requirements) for each of the categories listed above, so make sure you understand these beforehand to ensure your application stands the best chance of approval.

Feeling overwhelmed with debts?

Whatever your situation, it's a good idea to talk to an adviser about your financial difficulties for help exploring all your financial options, to consider the tax consequences of accessing super early and to get assistance with applying for a release. Contact us today for expert advice to help you get your finances back on track.

IMPORTANT: This communication is factual only and does not constitute financial advice. Please consult a licensed financial planner for advice tailored to your financial circumstances Email us at Robert Goodman Accountants at reception@rgoodman.com.au.  © Copyright 2020 Thomson Reuters. All rights reserved. Brought to you by Robert Goodman Accountants. 

Do you have any amounts of offshore income you haven't declared to the ATO – perhaps interest from a foreign bank account? Even if it seems like a small amount, you must declare it. International data-sharing arrangements are making your overseas financial affairs increasingly transparent, so don't get caught out. Find out how foreign income is taxed and what you need to do.

The ATO is reminding taxpayers about their obligation to report foreign income, and it's keen to emphasise that its techniques for detecting offshore amounts are becoming increasingly effective. Cross-border cooperation between different tax jurisdictions means your financial information is being shared more than ever before – increasing the odds of your affairs being uncovered by the ATO.

Failing to report foreign income can attract penalties and ATO scrutiny of your broader tax affairs. Got any amounts you've overlooked? Now is a great time to get help from your tax adviser with making a disclosure.

How is foreign income taxed?

If you're an Australian resident for tax purposes, you're taxed on your worldwide income. This means you must declare all foreign income sources in your return. You should consider whether you've earned any amounts from:

  • investments held overseas, such as dividends, rental income from properties and interest from bank deposits;
  • overseas pensions;
  • overseas employment, including salary and directors' fees; and
  • the sale of offshore assets (ie capital gains).

What if you've already paid tax on the income overseas? You still need to declare it to the ATO. However, you may be able to claim an offset for the tax already paid in order to prevent double taxation.

It's a good idea to get assistance from a tax professional when declaring foreign income. All figures must be converted to Australian dollars according to particular exchange rate rules, and you may also need to apportion amounts that were earned in countries that don't have an income year ending 30 June. Your tax adviser can also help you calculate your available offset for foreign tax already paid, which is subject to a certain limit if your claim exceeds $1,000.

Are you a "resident"?

You're only taxed on your foreign income if you're an Australian resident for tax purposes. If you're a non-resident, you generally only pay tax on your Australian-sourced income.

Being an Australian resident for tax purposes is different to immigration concepts of residency, and your nationality is generally not relevant. So even if you aren't an Australian citizen or permanent resident, you could be a resident for tax purposes.

The main test for tax residency is whether you "reside" in Australia. There's no single factor that determines whether you meet this test.

Instead, it requires a weighing up of all relevant circumstances, including things like your intentions, your family and living arrangements, business and employment ties, and so on.

However, even if you don't currently "reside" in Australia for tax purposes, you may still be a resident for tax purposes under several alternative tests (including where both your "domicile" and permanent place of abode are maintained in Australia). Seek professional advice if you're in any doubt about your tax residency status.

Making a voluntary disclosure

If you think you may have omitted some foreign income from a previous tax return, you can make a voluntary disclosure to the ATO and pay any tax you owe. You'll often receive a reduction in ATO penalties and interest that would otherwise apply – and the outcome is generally much more favourable if you make this disclosure before the ATO commences an audit of your tax affairs. Given the ATO's increased powers to detect offshore amounts, taxpayers with unreported income should think seriously about the benefits of proactive disclosure.

Unsure about your foreign income?

Contact our office if you have any questions about tax residency, foreign income or making a voluntary disclosure. We'll help you navigate the rules to ensure your offshore financial affairs are sorted.

Email us at Robert Goodman Accountants at reception@rgoodman.com.au.  © Copyright 2020 Thomson Reuters. All rights reserved. Brought to you by Robert Goodman Accountants.